Oil boom fuels whopping N.L. surplus
Province ends last year with $1.1 billion more than forecast
Newfoundland and Labrador used a gusher of oil-based revenues Tuesday to slash its debt, cut taxes and bolster spending on health, roads and other public services.
Premier Danny Williams called the budget, which forecasts a surplus of $544 million for the coming fiscal year, "unprecedented" and said it represents "an outstanding turnaround in four short years."
The government also disclosed that it finished the 2007-08 fiscal year with a surplus of $1.4 billion, which was $1.1 billion more than it projected in last year's budget.
Finance Minister Tom Marshall unveiled a litany of moves, including tax cuts, program improvements and new initiatives, spread across practically every part of the government's domain.
Among almost $180 million in tax cuts is a one per cent drop in all personal income tax rates, effective July 1.
That cut will give Newfoundland and Labrador the fourth-lowest tax regime in the country, a massive swing from the last-place position it held only a few years ago.
The government is also cutting motor vehicle registration fees, from $180 to $140, and is lifting the threshold on the payroll tax, which it says will mean about $6.5 million more in the pockets of employers.
Last week, Williams had announced another cut, the elimination of the 15 per cent tax on insurance premiums.
Burgeoning revenues have also allowed the government to unleash an ambitious set of program spending.
Spending hike deemed sustainable
Marshall told reporters that while program spending is up this year by more than nine per cent, he maintains that the spending jump is sustainable.
"This is a monumental budget," Marshall told reporters during a briefing.
Describing it as the most generous in history, Marshall said the government finally has the resources to fix sagging infrastructure, provide meaningful wage increases to its employees and spur economic innovation.
"Bold, imaginative thinking has changed the face of Newfoundland and Labrador," said Marshall, who underscored that the province's turn of fiscal fortune was due to more than windfalls from the offshore oil industry.
"Economic prospects have never looked better. This turn of fortune has not happened by accident," he said. "It has happened by design."
Oil pegged at $87 per barrel
While Marshall credited numerous factors with turning around Newfoundland and Labrador's fortunes, oil undoubtedly is playing a key role in the current boom.
Oil royalties alone are expected to account for $1.7 billion in the coming year. To calculate that, the government is forecasting oil to sell at $87 per barrel, which Marshall described as a "conservative" estimate.
Marshall warned that some areas of the economy, particularly the export-sensitive forest and fishery sectors, are weakening because of U.S. economic troubles.
Still, he said global demand for oil and also for metals, which is driving the mining boom in the province, are more than compensating for those problems.
The government chose not to reduce taxes on gasoline and other fuels, and did not amend an existing rebate program on home-heating fuel. Marshall said that program will be reviewed in the fall, to account for further changes in heating costs.
Marshall, who said the government has "wrestled down the fiscal dragon," also announced plans to spark economic growth, and to tackle stubborn problems, including the drop since the early 1990s in the province's population.
Debt problem still unresolved: minister
Debt reduction continues to be a hallmark for the governing Progressive Conservatives. The province will put another $300 million toward paying down its net debt, and expects to finish the current fiscal year with $10 billion.
Marshall cautioned that the debt will continue to be a looming problem.
"This amount is still too high," Marshall told reporters during a briefing.
Although advised by Auditor General John Noseworthy to eliminate the debt altogether, Marshall said he instead would prefer to run consecutive surpluses while whittling down the debt.
"Our goal of fiscal autonomy is clearly on the horizon," Marshall told reporters.
Marshall said last year's surplus has been dedicated to debt reduction, infrastructure and Newfoundland and Labrador Hydro, in part to help with preparations for the proposed Lower Churchill hydroelectric megaproject.
Infrastructure spending given huge boost
The budget includes scores of programming points, from an increase to the seniors' benefit to a modest increase in spending on home care.
Some $673 million is being targeted for infrastructure, including a new municipal cost-sharing arrangement announced last week. The budget also includes $182 million in highway and road upgrades.
Responding to the budget's theme of sustainability, Marshall underscored several initiatives designed to bolster the workforce, including making local workplaces more attractive to employees tempted by work in other jurisdictions.
Among other things, the province is creating a "youth retention and attraction strategy" to recruit young workers to jobs inside the province.
As well, the province is boosting measures to persuade nursing and medical students to stay in the province after graduation.
Indeed, health care was a focal point through much of the budget.
Under fire for months for ignoring crumbling hospitals, the government is pushing an extra $135 million in capital funding in that sector in the coming year — not far removed from what it spent during its first four-year term in office.
Cancer detection, treatment highlighted
A boost of operating spending brings the total spending on health to $2.3 billion, by far the largest wedge of the $6.4-billion spending pie.
Health spending has been an especially acute issue for the government this year, as the unfolding Cameron inquiry exposes weaknesses in the health-care sector, beyond its mandate of hormone receptor testing for breast cancer patients.
The government took care to note, for instance, that much of the $52 million it will spend on new equipment is targeted toward cancer detection and treatment, including new digital mammography, X-ray and other diagnostic equipment.